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di Massimiliano Blasone – 23.2.2019

Prerequisites

The economic success of a State is closely linked to the efficiency of its judicial system.

A judicial system is fundamental to ensuring the rule of law in a State and protecting the core values of those who work within its borders. In particular, an efficient judiciary ensures that individuals and businesses may exercise their full rights, it strengthens mutual trust and it helps to create an environment conducive to business and economic investment.

The efficiency of a judicial system is assessed on the basis of the reasonable time frame duration of its proceedings (art. 6 European Court of Human Rights (ECHR); art. 111 Italian Constitution), and that time frame includes implementation. Poor implementation, especially with regard to real estate proceedings, affects not only the reliability of a State in international markets, but also the rights of creditors to be compensated within a reasonable time frame (art. 6 of global code of enforcement).

As noted in the Doing Business Report 2018, the “Enforcing contracts” measurement ranks Italy 108 out of the 180 countries examined in terms of the time and cost of resolving a dispute, and this is considered indicative of the efficiency and effectiveness of a judicial system. Moreover, the data published by the European Commission in the 2017 EU Justice Scoreboard, in which the timeliness of judicial proceedings is used as a parameter for justice efficiency, indicate that, based on 2015 data, Italy ranks as the worst country in Europe in this regard. Lastly, using data from 2016, the 2018 Council of Europe European Commission for the Efficiency of Justice (CEPEJ) report of judicial systems confirmed that despite consistent improvement over time, the duration of proceedings is much lengthier in Italy versus the European average, although the report also noted that the situation was slowly and steadily improving.

            Specific legislative measures have recently been adopted to remedy critical issues in the Italian judicial system regarding efficiency in real estate procedures. In addition, the current economic crisis has led to an increasing number of foreclosures, further impeding the work of the courts.

            The most significant reform adopted in this area was one that provided for a judge’s right to involve professionals registered with their respective professional bodies, in real estate procedures. Pursuant to Law no. 302/98 and the subsequently adopted Law no. 80/2005 and Law no. 203/05, notaries, attorneys and accountants have increasingly become involved in, and responsible for, activities that were once exclusively the domain of judges and court registrars. These activities include specific tasks identified in art. 591-bis of the Code of Civil Procedure (c.p.c.), and are comprised of the drafting and publication of sales notices, organizing auctions, drafting transfer decrees, and the distribution of sales proceeds. The previous means for judges to designate a delegate was replaced in 2015 by Law no. 83, which made it obligatory to use either a professional notary, attorney or accountant who was officially registered and on a special court list available to all judges overseeing property transactions, as per art. 179 ter disp. att. of the Code of Civil Procedure (c.p.c). By virtue of their appointment, these professionals act in the capacity of a public official and are agents of a judge.

            Following this reform, and with the aim of further improving the effectiveness of procedures, improving the time efficiency of sales and optimizing the proceeds derived there from, further measures were implemented, including the creation of an Internet portal known as the “public sales portal“, which advertises all court-related sales. Since 2018, all professional delegates have been required to post all notices of sales on this portal. In 2018, a measure was also introduced requiring delegates to manage court-related foreclosed real estate sales through telematic auctions.

            Moreover, the two amendments made to art. 560 of the Code of Civil Procedure in 2015 and 2016, have meant that an eviction from a foreclosed property is no longer the responsibility of judicial officer, but rather of an experienced judicial custodian. In most cases this person is the delegate for the sale, and is required to follow directives and procedures indicated in an eviction order. This order becomes enforceable by a judge as soon as the sale is arranged, without any waiting time regarding the auction or subsequent property transfer.

            It was generally believed that the most important factor regarding the ineffectiveness of enforcement procedures and the complete and detrimental division between the market for court-related sales and the real estate market at large, had to do with uncertainty surrounding timing and costs pertaining to the seizure of a property from an occupant. This uncertainty discouraged participation in sales auctions. Therefore, the amendments to art. 560 of the Code of Civil Procedure (c.p.c.) pertaining to best practices applied by certain Italian courts, introduced the possibility of releasing a property to a purchaser before official ownership transfer, and also increased the power of the judicial custodian, who was no longer required to follow complex rules regarding the vacancy of property as per the previously existing procedures set forth in art. 605 et seq. of the Code of Civil Procedure (c.p.c). These previous articles also included judicial officer involvement as part of the legal process.

            These rules have created a new professional role to whom the tasks of a sales delegate and a judicial custodian are entrusted. According to art. 16 of the global code (cod. mond. esec). The judge gives this enforcement agent responsibility for overall administrative management of the real estate procedure execution. The judge retains only an oversight role with regard to the work of that agent and the proceedings themselves.

Overview of the initiative

  1. a) Scheme description (general practices)

            In order to collect and disseminate procedural experiences that were successful in the court system but were not officially adopted into law, as in the case of the new art. 560 of the Code of Civil Procedure (c.p.c), the Superior Council of Magistracy approved the use of “Guidelines on good practice in real estate executions” with the resolution of October 11, 2017. Instruments and operational models, which had proven to be efficient, and the provisional measures and minutes to be adopted were provided to judges, sales delegates and judicial guardians to streamline the management of procedures in terms of activities overseen by judges and their agents.

            Efforts have been made to speed up the execution of real estate procedures, including the following:

  • facilitating a complete in-depth preliminary investigation by a real estate appraiser and the custodian regarding necessary documentation pursuant to art. 567, paragraph 2, of the Code of Civil Procedure to allow for identification of the relevant property. For this purpose, a model file, or smartcheck, is prepared in Excel so that file data may be used by the judge to do a quick check;
  • formulating a model decree on the convening of hearings for sale authorizations that allows the judge to designate a judicial custodian immediately following the appointment of the real estate appraiser, so that the judge and the judicial custodian can collaborate with the appraiser to verify the facts of the case;
  • formulating a model dual-use delegate sales framework, including operational and program content. Under the model framework the judge is, moreover, encouraged to provide operational instructions, both to the delegated professional with regard to the management of the sale, as well as to the bidders with regard to the submission of offers and the tendering procedure;
  • suggesting that the order for a debtor or third-party occupier lacking a title to leave a property be issued at the same time as the sale authorization. (New regulations state that it is possible to issue such an order at the beginning of the seizure process, but decisions regarding timing are left to the discretion of the individual judge);
  • formulating a model ownership transfer decree;
  • suggesting a model summons for hearings to approve proposed settlement plans (on the basis of which payments are made to creditors and enforcement proceedings are terminated);
  • formulating a model disclosure form to be sent to the debtor or occupier of the property by the judicial custodian. This form, which is not required under the law but is based on the best practice of certain courts, allows the debtor to be informed of the status of the procedure and of all means that may be used to suspend or terminate the enforcement proceedings, including non-judicial means. Therefore, the custodian fills a sort of “social” role, in that he/she is separate from the interests of creditors, who may think that an alternative solution that does not involve selling the foreclosed property is acceptable.
  1. b) Scheme description (local procedures – Court of Trieste)

            However, the practices compiled and circulated by the Superior Council of Magistracy are not comprehensive, rather, there are additional practices currently used by local courts. Practices are constantly being updated in order to resolve issues of legal interpretation, or in light of new organizational measures introduced to improve the effectiveness and expediency of the legal system. Practices in the first group are sometimes collected by judges in circulars that must be adhered to by those who work in that court, while practices in the second group are often included in protocols shared between the judicial authority and associations of Councils for Delegated Professionals. Those protocols are not stringent, because they concern good conduct rules and compliance with them is left to the discretion of the parties. However, they are an important means of debate and discussion.

            Therefore, many specific issues come to light during individual cases and the solutions for these issues are disseminated so as to contribute to updated protocols for both present and future cases. Cases in this category are not ideal for a complex overall examination. Therefore, it is preferable to focus on certain local practices that are widespread within the Court of Trieste, in combination with those suggested by the Superior Council of Magistracy.

            These cases include the following:

  • the delegate notifies creditors of the proposed settlement plan prior to the filing of that plan. Any observations or proposals for additions can thus be taken into account prior to the hearing to approve the settlement plan. so that after review by a judge, no disputes can arise. This prevents postponements or objections that would delay a procedure’s conclusion;
  • the delegate notifies the debtor of the sale notice. The time limits for any objections begin as soon as the debtor is notified, thus impeding the admissibility of claims of late-filing and related challenges, which are often filed after the sale;
  • As clearly stated in the eviction order, the judicial custodian may appoint a co-judicial custodian, with costs to be incorporated into the case process and approved by the judge, to stand in for him/her in certain procedures (e.g., accompanying bidders to visit a building before an auction, and drawing up an inventory of any damaged property in the vacated property) or during specific phases of the procedure (e.g., sub-delegation during the eviction phase), and to provide support during eviction operations.

We wish to discuss this local practice and highlight the ways in which it is applied.

Following the issuance of the eviction order, the judicial custodian is assigned the task of ensuring its implementation as per the timing and requirements indicated by the judge. After the property has been auctioned, the judicial custodian asks the debtor or current occupants to vacate the property within the time period set by the judge. In the event of non-compliance, the custodian will set a date for the eviction to be enforced by law enforcement, duly notifying all those concerned.

Concurrently and on the basis of the information gathered when access to a property is granted, the judicial custodian forms a group of private and public officials to provide him/her with assistance during the eviction. This group includes the following: law enforcement officers to assist in the case of any resistance, a locksmith to change locks, and the co-judicial custodian who aids in drawing up an inventory list of damaged property. In addition, medical and paramedic staff is available, and if needed, medical specialists with areas of expertise in certain diseases (both physical and mental) are available to provide assistance to those subject to the eviction. Other people will be involved in the process and the judicial custodian will apprise them of the situation in advance. This group may include individuals from social services, (especially when minors and elderly people are involved) and local authority representatives, the latter of whom will aid in finding emergency temporary housing. The inclusion of the aforementioned people is expressly provided for in the eviction order, which allows the judicial custodian to resort to them if the debtor finds it difficult to find a new dwelling and must make a request to the municipality for an alternative dwelling or temporary emergency shelter.

 Essentially, in these cases the judicial custodian is called upon to carry out a process which, on the basis of the Court of Trieste eviction order and actions outside general law statutes, is intended not only to facilitate the vacating of a property and the protection of the purchaser’s right to gain possession of that property, but also to safeguard the health and dignity of the debtor.

An enforcement agent therefore enhances the efficiency of the process and, as is the case in Trieste, can act as a kind of “social shock absorber”; this is especially true if the role of the enforcement agent can be strengthened and encouraged through collaboration with social services and local authority stakeholders.

Effects of the scheme

            There is no disputing the fact that the application of all of these best practices both at the general and local levels, in addition to the new regulations, has had a profound and positive impact on the efficiency of real estate verdicts in Italian courts, as confirmed by 2017 and 2018 data and reported below. However, it is not possible to determine which regulatory steps or specific practices have been responsible for these positive effects since it is likely that all factors have, in various ways, enhanced procedural efficiency during the last two years.

            The reduction in the time needed for procedures has been confirmed through the review of January 10, 2019 that was undertaken by the Ministry of Justice (see doc. 1), through the review of best practices of June, 18, 2018 that was undertaken by the Superior Council of Magistracy (see doc. 2) and by the data published by Tavolo di Studio sulle Esecuzioni Immobiliari (TSEI) for 2017 and the first half of 2018, (see attached newspaper reports (doc.ti 3-4)). These last reports highlight that, in 2017, the Trieste Court of Real Estate Executions was the most efficient in Italy, and was in second place for the first six months of 2018.

Possible future implementation

            Given the key role played by sales delegates, an improvement in the efficiency of enforcement procedures is closely linked to their competence and preparedness, and these factors must be verified in order to include them in the aforementioned court lists.

            The Ministry of Justice decree regulating access to the list of professionals and their training has been a requirement by law since 2016, according to art. 179 ter disp. att. of the Code of Civil Procedure (c.p.c.), but no action has, as yet, been taken to ensure compliance with that requirement.

The court decree should establish:

  • the initial training requirements for inclusion in the list;
  • periodic on-going training requirements as conditions for inclusion;
  • the procedures for verifying that training requirements have been met;
  • the contents and process for submitting applications;
  • the structure and operating procedures at each Court of Appeal of the commission responsible for maintaining the list, supervising listed individuals, assessing applications for registration and adopting measures for removal from the list;
  • the identification of training and refresher programs set forth in the Supreme Council of Magistracy guidelines.

As efficient, effective and timely enforcement procedures help to uphold the strategic interests and the prospects of all citizens, it is hoped that the adoption of the aforementioned decree will take place as soon as possible.

It is also likely that the role played by judicial custodians, in terms of finding housing for persons who are evicted from a seized property, may be underscored by the signing of memoranda of understanding between the judicial authority, social services and local authorities to facilitate access to information and establish preferential channels for resolving the housing emergencies of evicted persons.

These steps, which cannot merely be a means for the custodian to achieve results since this would jeopardize the efficiency of the eviction procedure, may have more impactful results if applied in an overarching sense and not only in certain cases, including when a judge considers the need for a housing solution due to critical situations involving “at risk” people such as minors, the elderly or the sick. Such factors must, moreover, be taken into consideration at the beginning of the case and not only as the date for the  eviction approaches.

Documents

Evidence for the efficiency gains are provided in the following:

  • review of January 10, 2019 by the Ministry of Justice;
  • review of best practices of June 18, 2018 by the Superior Council of Magistracy;
  • journal articles on the data published by TSEI.

Support provided by the competent judicial authorities

            The application of best practices is highlighted in enforcement court orders. A concrete example is provided in an attached document (see doc.ti 5-6), which includes copies of sales and eviction orders issued by the Court of Trieste (with all personal data removed for privacy reasons).

            The Council of the Bar Association of Trieste is aware of the importance of on-going research into and application of new best practices, and continues to play an active role in facilitating discussions with judges and professional delegates and their participation in a committee tasked with this objective.

Scheme usage in other courts

            In line with the laws of each State, the practices described above, which are aimed at achieving enforcement procedure efficiency, uphold a number of specific principles including:

  • the allocation of power to sell and enforce the vacancy process of foreclosed property to a single professional (the enforcement agent);
  • the appointment of the enforcement agent early on in the process;
  • interdisciplinary cooperation between the enforcement agent and the real estate appraiser from the very beginning of the process;
  • the inclusion in the sales order of both legal grounds and practical instructions for the delegate and bidder;
  • property vacancy prior to the sale.

A practice aimed at achieving quality in the executive legal system, namely enhancing the role of the enforcement agent as a veritable “social shock absorber“, also has immediate applications:

  • Informing the debtor of the status of the procedure and of the legal means to which he/she may resort to avoid the sale of the property;
  • Providing assistance in finding new housing in the event of a residential property foreclosure.